Assume a parent company acquires its subsidiary by paying $1,300,000 for all of the outstanding voting...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
Assume a parent company acquires its subsidiary by paying $1,300,000 for all of the outstanding voting shares of the investee. On the acquisition date, subsidiary's assets and liabilities have individual fair values that equal their book values, except for property equipment with a fair value greater than book value by $150,000 and license with a fair value greater than book value by $250,000. The parent and subsidiary have the following balance sheets immediately after the acquisition, but before any pushdown adjustments by the subsidiary: Parent Subsidiary Assets: Cash & receivables Inventory Property & equipment, net Equity investment Licenses Liabilities and stockholders' equity: Current liabilities Other liabilities Note payable Common stock APIC Retained earnings Description Property & equipment, net Licenses Goodwill $ 800,000 $150,000 600,000 200,000 2,300,000 825,000 1,300,000 Pushdown equity 75,000 $5,000,000 $1,100,000 a. Compute the amount of goodwill implicit in the acquisition of the subsidiary. $ 250,000 + ✔ + ✓ + x + X $ 400,000 $ 200,000 300,000 b. Assume the subsidiary elects to apply pushdown accounting immediately after the above financial statements were prepared. Provide the journal entries required for the subsidiary to apply pushdown accounting. 400,000 1,670,000 100,000 1,430,000 200,000 1,200,000 350,000 $5,000,000 $1,250,000 Debit 150,000 250,000 ✓ 250,000✔ 0 ✓ 0 x 0✔ Credit 0 ✓ 0✔ 0✔ 650,000 ✓ 0✓ 0 x c. Prepare the consolidation entry or entries on the date of acquisition, assuming the subsidiary applied pushdown accounting. Debit Credit 100,000✔ 200,000 ✓ 250,000 * Description [E] Common stock APIC Pushdown equity Equity investment Assets: Cash & receivables d. Prepare the consolidated balance sheet on the date of acquisition. Consolidated Balance Sheet Inventory Property & equipment, net Licenses Goodwill + ✓ + + ✓ Other liabilities Note payable Common stock APIC Retained earnings $ 950,000✔ 800,000 3,275,000✔ 325,000✔ 250,000 ✓ 5,600,000 ✓ $ Liabilities and stockholders' equity: Current liabilities $ 0 0 0✔ 550,000 * 600,000✔ 300,000✔ 400,000✔ 1,670,000✔ 1,430,000✔ 1,200,000✔ $ 5,600,000✔ Assume a parent company acquires its subsidiary by paying $1,300,000 for all of the outstanding voting shares of the investee. On the acquisition date, subsidiary's assets and liabilities have individual fair values that equal their book values, except for property equipment with a fair value greater than book value by $150,000 and license with a fair value greater than book value by $250,000. The parent and subsidiary have the following balance sheets immediately after the acquisition, but before any pushdown adjustments by the subsidiary: Parent Subsidiary Assets: Cash & receivables Inventory Property & equipment, net Equity investment Licenses Liabilities and stockholders' equity: Current liabilities Other liabilities Note payable Common stock APIC Retained earnings Description Property & equipment, net Licenses Goodwill $ 800,000 $150,000 600,000 200,000 2,300,000 825,000 1,300,000 Pushdown equity 75,000 $5,000,000 $1,100,000 a. Compute the amount of goodwill implicit in the acquisition of the subsidiary. $ 250,000 + ✔ + ✓ + x + X $ 400,000 $ 200,000 300,000 b. Assume the subsidiary elects to apply pushdown accounting immediately after the above financial statements were prepared. Provide the journal entries required for the subsidiary to apply pushdown accounting. 400,000 1,670,000 100,000 1,430,000 200,000 1,200,000 350,000 $5,000,000 $1,250,000 Debit 150,000 250,000 ✓ 250,000✔ 0 ✓ 0 x 0✔ Credit 0 ✓ 0✔ 0✔ 650,000 ✓ 0✓ 0 x c. Prepare the consolidation entry or entries on the date of acquisition, assuming the subsidiary applied pushdown accounting. Debit Credit 100,000✔ 200,000 ✓ 250,000 * Description [E] Common stock APIC Pushdown equity Equity investment Assets: Cash & receivables d. Prepare the consolidated balance sheet on the date of acquisition. Consolidated Balance Sheet Inventory Property & equipment, net Licenses Goodwill + ✓ + + ✓ Other liabilities Note payable Common stock APIC Retained earnings $ 950,000✔ 800,000 3,275,000✔ 325,000✔ 250,000 ✓ 5,600,000 ✓ $ Liabilities and stockholders' equity: Current liabilities $ 0 0 0✔ 550,000 * 600,000✔ 300,000✔ 400,000✔ 1,670,000✔ 1,430,000✔ 1,200,000✔ $ 5,600,000✔
Expert Answer:
Answer rating: 100% (QA)
a Computation of Goodwill b Particulars cash receivables Inventory plant equipment 82500... View the full answer
Related Book For
Fundamentals of Advanced Accounting
ISBN: 978-0077862237
6th edition
Authors: Joe Ben Hoyle, Thomas Schaefer, Timothy Doupnik
Posted Date:
Students also viewed these accounting questions
-
Assume that a parent company acquires its subsidiary on January 1, 2016, by exchanging 40,000 shares of its $1 par value Common Stock, with a market value on the acquisition date of $29 per share,...
-
Assume the Parent company acquires its subsidiary by exchanging 35,000 shares of its Common Stock, with a fair value on the acquisition date of $60 per share, for all of the outstanding voting shares...
-
Assume that a parent company acquires its subsidiary on 1/1/2016 by exchanging 41,500 shares of its $1 par value common stock . The market value of the common stock on acquisition date is $36 per...
-
In Problem 3.67 on page 135, you were introduced to a tea-bag-filling operation. An important quality characteristic of interest for this process is the weight of the tea in the individual bags. The...
-
1. The formula for the volume of a cylinder is V = r2h. If V = 2100 m3 and h = 17.0m, find r. 2. The formula for the area of a triangle is A = bh. If b = 12.3 m and A = 88.6 m2, find h. 3. Find the...
-
1. Open the general ledger accounts and accounts receivable ledger accounts shown below. Enter the balances as of April 1, 2019. 2. Post the entries from the general journal in Problem 7.4A to the...
-
What are the ethical obligations in using social media sites in litigation?
-
Weber Valley Regional Hospital has collected data on all of its activities for the past 16 months. Data for cardiac nursing care follow: Required: 1. Using the high-low method, calculate the variable...
-
Production Departments The Madalilangto Ink Company prepared the following table for the year 2019: Service Departments H G U v W Rent 250,000 770,000 15,000 14,500 7,000 Repairs 100,000 120,500...
-
The CitruSun Corporation ships frozen orange juice concentrate from processing plants in Eustis and Clermont to distributors in Miami, Orlando, and Tallahassee. Each plant can produce 20 tons of...
-
A dietician wishes to mix together two kinds of food X and Y in such a way that the mixture contains at least 10 units of vitamin A, 12 units of vitamin B and 8 units of vitamin C. The vitamin...
-
Using the slope formula, compute the slope of the line that goes through (17, 5.5) and (16,-5). Slope 22.5/21 Not equivalent. Now find the equation of the line in the form = mx + b. Equation Nope....
-
A neutral lithium atom is ionized, losing an electron to form Li* and resulting in a decrease in its atomic size. The ionization energy required to do this is 520kJ/mol. If we were to remove a second...
-
A physical examination was used to scan for breast cancer in 2500 women with biopsy proven adenocarcinoma of the breast and 5000 age and race matched control women. The result of the physical...
-
Suppose that * is a stationary point of the problem minimize f(x) subject to 1+2x2 x3 = 5, 5x12x2 where f: R R is such that Vf(x) = = -2x1 + 4x2 +8 -6 Fill in the blanks below. x = B, where A B=...
-
Light of wavelength 584 nm illuminates a round 0.5-mm diameter hole. A screen is placed 7.2 m behind the slit. What is the diameter of the central bright area on the screen in millimeters? Give the...
-
One form of the Pythagorean Identity can be written as: tan0+1 = sec0, determine the value of tan0-sec 0 for 0 - 4 Can you see how this this agrees with the stated Pythagorean Identity?
-
Which task is performed by a book-keeper? A. Analysing the trading results B. Entering transactions in the ledger C. Preparing year-end financial statements D. Providing information for...
-
The following separate income statements are for Burks Company and its 80 percentowned subsidiary, Foreman Company: Additional Information Amortization expense resulting from Foremans excess...
-
On January 1, 2014, Allan Company bought a 15 percent interest in Sysinger Company. The acquisition price of $184,500 reflected an assessment that all of Sysingers accounts were fairly valued within...
-
In 2015, the City of Coyote received a $320,000 cash grant from the state to reduce air pollution. Assume that although a special revenue fund could have been set up, the money remained in the...
-
Find the z-scores that bound the middle 70% of the area under the standard normal curve.
-
Find the z-scores that bound the middle 80% of the area under the standard normal curve.
-
Find the z-scores that bound the middle 98% of the area under the standard normal curve.
Study smarter with the SolutionInn App